European finance ministers held their first discussion on how to integrate the agreement reached at the OECD on international tax reform into the European Union on Tuesday 18 January 2022 (see EUROPE 12859/6).
A priority of the French Presidency of the Council of the European Union in the first half of 2022, the implementation of this text has been welcomed by all Member States.
The French minister, Bruno Le Maire, has repeatedly boasted of this achievement, which he says is a “victory for the European Union”. “We have been fighting for this international taxation for five years, we have achieved it, it is the product of European determination”, he recalled, insisting on the need for Europe to hold onto “the leadership”.
With this in mind, the French Presidency is pushing for the proposal for a directive aimed at implementing Pillar II of the international agreement, relating to a minimum taxation of multinational companies of 15%, to be adopted unanimously before the end of June, or even at the March Ecofin Council.
While for some, like the Spanish representative, “it is crucial to move forward quickly”, other ministers expressed their concerns. “Quality must be chosen over speed”, warned Keit Pentus-Rosimannus of Estonia. Mikael Damberg, the Swedish minister, also expressed concern about the timeframe, not least because of the constitutional rule for making laws.
Mihály Varga of Hungary also argued that some technical details needed to be analysed before the text could be transposed at national level, in particular the taxation of members of multinational groups.
While Belgian Minister Vincent Van Peteghem called the text “faithful” to the agreement, Ms Pentus-Rosimannus expressed concern about “the mandatory nature of the implementation of this minimum tax rate in all Member States”. According to her, “the impact on multinationals and on our domestic rules was not an integral part of the OECD agreement”, as the purpose of the agreement was “to tackle tax base erosion practices in cross-border situations”.
Poland links Pillars I and II of the agreement
Furthermore, some of the ministers considered that the transposition of Pillar II and the implementation of Pillar I of the international agreement on the reallocation of taxing rights for multinationals went hand in hand.
For the Polish minister, Tadeusz Kościński, “Pillars I and II are linked, they must be implemented at the same time”. He insisted that the proposal should legally bind the two pillars.
“At the moment, we don’t see very clearly how we are going to progress on the first pillar on the digital aspects. Indexing mechanisms should be included in the standard rules to avoid the erosion of de minimis exemptions”, stressed Keit Pentus-Rosimannus.
Paolo Gentiloni, European Commissioner for the Economy, was reassuring on the issue: “A package is a package (...), you can count on the fact that the European Commission will support the implementation of both pillars”.
Bruno Le Maire insisted that there is a “fundamental legal difference between the two pillars”. “Pillar II needs to be transposed in the form of a directive, whereas Pillar I is done in each Member State”, explained the current President of the Ecofin Council.
In an attempt to allay fears, the Commissioner and, later, the French Minister insisted that the proposed directive would not prevent Member States from changing tax rates in other areas, as they would retain their sovereignty in this area.
See the French Presidency document on which the ministerial discussions were based (in French): https://bit.ly/3tAM98M (Original version in French by Anne Damiani)